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Exam 17: Public Goods Common Resources

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Question 111

Multiple Choice

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Computer software that you can download from the Internet for a price is an artificially scarce good because it is _____ but _____ in consumption.

A) nonexcludable; rival
B) excludable; nonrival
C) nonexcludable; nonrival
D) excludable; rival

E) All of the above
F) C) and D)

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Question 112

Multiple Choice

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As a big music fan, you want to attend a weekend blues festival in your town. The purchase of a wristband gives you and thousands of other fans access to the outdoor concert pavilion. The blues festival is a good that has the characteristics of being:

A) rival and excludable.
B) nonrival and excludable.
C) rival and nonexcludable.
D) nonrival and nonexcludable.

E) None of the above
F) A) and B)

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Question 113

Multiple Choice

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Traffic congestion imposes higher costs and discomfort to residents of a city because the marginal social cost of any one individual's use of the roads is _____ the individual marginal cost.

A public good is _____ and _____ in consumption.

A public good is one that is generally available for consumption by the public; that is, a person does not have to be a member of a special group or a club to be able to consume it. A good example would be milk for sale in a grocery store that is open to the public.

For a good to be efficiently provided by the private market, it must be:

A whale is a common resource because the private market _____ prevent consumption by people who do not pay for it, and the same whale _____ be consumed more than once.

The best example of a common resource is:

National defense and e-books are similar in that both are _____, but they differ in that national defense is _____, while e-books are not.

A software program is similar to an apple in that it is _____, but it is also similar to public safety in that it is _____.

Which of the following statements is TRUE?

The tendency of people to avoid paying for a good's benefits when the benefits can be obtained for free is called the _____ problem.

When goods are rival in consumption and excludable, markets:

Use the following to answer question: Figure: Model of a Market for a Common Resource -(Figure: Model of a Market for a Common Resource) The figure Model of a Market for a Common Resource shows the intersection of the private supply and demand curves. Without any consideration of the marginal social cost of using a common resource, the quantity of the common resource used at Q will be:

Use the following to answer questions: Scenario: Ben and Nick Ben and Nick are the only members of a community. They have revealed the marginal private benefits they each receive from a public good whose marginal social benefit is known. In addition, the marginal social cost (MSC) of the public good is known and is constant. -(Scenario: Ben and Nick) Look at the figure and scenario Ben and Nick. At all levels of provision of the public good:

Since individuals ignore the effect of their use on the amount of a resource remaining for others, common resources are subject to overuse when left to the private market.

Goods that are nonrival in consumption and nonexcludable are _____ goods.

Any road without a toll can be thought of as a common resource, since it is nonexcludable and rival in consumption.

To maximize society's welfare, the government should produce a public good up to the point at which the marginal social benefit _____ the marginal social cost.

Use the following to answer questions: Figure: Demand and Marginal Revenue -(Figure: Demand and Marginal Revenue) The figure Demand and Marginal Revenue refers to a software upgrade. The producer incurred fixed costs of $10 million to produce the upgrade; the marginal cost of allowing consumers to download the upgrade is zero. What is the efficient price of the upgrade?